Elder and Estate Planning

Naming Someone to Make Medical and Financial Decisions

Many Alzheimer’s and Parkinson’s patients face a future when they can no longer make their own decisions. Proper planning allows you to name a family member or trusted friend to have the legal authority to carry out your wishes if you can no longer make or communicate your own wishes. But if you don’t grant these decision making powers yourself, someday your family may be forced to pursue a court appointed guardianship. As discussed below, generally a guardianship limits planning options, and it is more expensive, time-consuming, and difficult than using a power of attorney.

Planning tip from Dennis Toman, Certified Elder Law Attorney: If you or a loved one is faced with a diagnosis of Alzheimer’s or Parkinson’s, the single most important planning step is to put into place the correct powers of attorney for financial and medical decisions. All too often I see clients who have no powers of attorney at all, or who had “traditional” powers of attorney that were not written with elder care concerns in mind. I shudder every time I see a “form” power of attorney purchased online or at an office supply store, because in my experience they are often deficient in dealing with these situations and are no substitute to having a carefully crafted power of attorney from a consultation with an elder law attorney. Having a “weak” power of attorney severely limits planning options. It may place your entire estate at risk for long term care and nursing home costs, possibly leaving you out of money and out of options at one of the most frail and vulnerable times of your life. Don’t let this happen to you or your loved ones! Talk with an experienced elder law attorney to make sure you have the proper powers of attorney in place to protect yourself and your family.

Managing Financial Matters: the Durable Power of Attorney

A durable power of attorney is a document that names an agent to handle financial, real estate, and business matters on behalf of the principal (the person who signs the power of attorney). Sometimes the agent is called an “attorney in fact.” The agent has the authority to act on the principal’s behalf, but only to the extent the principal granted the power to act in the document. People who have Alzheimer’s or Parkinson’s generally should have a very broad, all-encompassing power of attorney.

Planning tip: Just having a durable power of attorney is not enough. Alzheimer’s and Parkinson’s patients should work with an elder law attorney to draft powers of attorney with these four key powers:

The power to apply for public benefits (such as Medicaid) in case that is later needed for your care;

The power to make unlimited gifts on your behalf and do Medicaid planning;

The power to make decisions based on your overall well-being, not just from a financial perspective; and

The power to create an irrevocable trust for you, and to remove or add assets to that trust.

In addition to signing a durable power of attorney with broad powers as described above, generally is it best for a person who has Alzheimer’s or Parkinson’s to make the power of attorney immediately effective. While North Carolina allows “springing” powers of attorney that take effect only when the principal is determined to be unable to make his or her own decisions, that can cause problems. For example, as the disease progresses, the patient may be moving in and out of cognitive impairment, sometimes able to make decisions and sometimes not. That could complicate the use of the power of attorney. Moreover, some springing powers of attorney require that one or two physicians give their written opinion that the patient can no longer adequately make his or her own decisions. This process may sound like a good idea in theory. But in the real world, at best it adds undue complication during an already stressful time. At worst it creates ill-will and family fights and even leads to lawsuits when the family has to take a parent to a doctor but the parent, argumentative and unyielding due largely to his or her demented state, refuses to go.

Some people are reluctant to sign a power of attorney because they believe they are giving up their independence. That is not the case. Someone who signs a power of attorney continues to have the authority to act for themselves. In fact, they even retain the authority to cancel the power of attorney at any time, as long as they are mentally capable of doing so.

Another concern many people have about powers of attorney is that they worry the agent may mishandle their money, even take money for the agent’s own use. This is always going to be a risk, but the agent will be held accountable by law to act only in your best interest. This is called a “fiduciary duty” and is imposed on your agent because of his or her position of trust. The agent must carefully track all receipts and expenses on your behalf. The court can require an agent to repay money that is lost through misconduct or gross negligence, and there are even criminal penalties involved for an agent who takes advantage of someone under a power of attorney.

Planning tip: An agent under a power of attorney always should keep careful records for financial dealings under a power of attorney. This includes keeping bank statements, cancelled checks, and expense receipts. Most importantly, always keep the principal’s money separate from the agent’s. Never combine or “co-mingle” accounts. The best way to do this is through separate checking accounts, and possibly using a credit card exclusively for the principal. Also, it is generally a good idea to maintain good communication among family members, which can avoid the resentment and disputes that often happen when other family members are not kept informed about the principal’s finances.

One of the biggest worries for people who have Alzheimer’s and Parkinson’s is making sure that their families can make medical decisions if the disease robs them of the ability to make or communicate those decisions themselves. That’s why it’s so important to have a durable power of attorney for health care decisions. This document is sometimes called a “health care power of attorney,” a “durable power of attorney for health care decisions,” or a “health care proxy.” It is a type of an advance medical directive, and it may include the authority of a “living will” (discussed below) for end of life decisions, or a separate living will document may be used in addition to the health care power of attorney.

A health care power of attorney is always a “springing” power of attorney. It only takes effect if you are unable to make or communicate your own decisions. However, like the durable power of attorney, the health care agent must act always in the principal’s best interest and as directed by the document.

A health care power of attorney is more than just a living will. A living will is the earliest type of advance directive, and it directs whether or not to administer artificial life support if you become terminally ill and cannot state your own wishes. On the other hand, the health care power of attorney will allow your agent to make decisions other than for end of life. In addition, the health care power of attorney can give standards for care and also provide for organ donation or donation of your remains for research into the treatment of Alzheimer’s or Parkinson’s disease.

Choosing Your Health Care Agents

Choosing your agent for the financial and health care powers of attorney bears careful thought. The agents under each document can be the same people, or you can choose different people. Typically, a family member acts as an agent but you may also select a trusted friend, or in some cases a lawyer or professional trust company. Choose the person to serve as your agent based on who you think will do the best job for you, not based on your desire to be “fair” among your children. The agent who deals with money must make sound financial decisions and be completely trustworthy in all financial dealings, preferably without his or her own financial worries. Ask yourself whether your agent, whether for financial or health care, will always act in your own best interests. And always be sure to talk with your agent so they know your wishes and how you would want them to act in certain situations. Particularly because Alzheimer’s and Parkinson’s tend to be long term illnesses and the power of attorney may need to be used for many years, your power of attorney should name back-up agents in case your primary agent is no longer available to act or dies. Otherwise, your power of attorney may become ineffective because no one remains who can serve as agent.

Guardianship

If a person who has Alzheimer’s or Parkinson’s reaches a stage where he or she can no longer make decisions for himself or herself, the court may need to get involved especially where there is no power of attorney in place. This should be avoided if possible. Guardianships can involve many thousands of dollars in attorney’s fees, ongoing court costs, unnecessary delays, extra paper work, and family fights. And even if the Alzheimer’s or Parkinson’s patient intended to protect his or her life savings from the high costs of nursing home care, many states do not allow Medicaid planning though a guardianship. You should consult with an experienced elder law attorney in your state for the best course of action if a guardianship becomes necessary.

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